Circle： Not Every Company Can Issue a Stablecoin
Circle： Not Every Company Can Issue a Stablecoin
Stablecoins have quietly shifted from a “crypto utility” into a piece of global financial infrastructure. In 2025, the conversation accelerated: more institutions explored onchain payments, more regulators moved toward clearer frameworks, and more businesses asked the same question—should we issue our own stablecoin?
Circle executive Kash Razzaghi framed this dilemma sharply in his essay “The Stablecoin Trap: Issuing a Stablecoin Without the Infrastructure to Run One” (also widely discussed via industry translations and commentary). The core idea is simple but often ignored: issuing a stablecoin is not a product launch—it’s an always-on financial operation built on trust, liquidity, and compliance. (Reference: Circle’s official blog, BlockBeats)
This article unpacks the “stablecoin trap” in practical terms: what infrastructure is actually required, why many teams underestimate it, and what users should look for when choosing and holding stablecoins.
The “Stablecoin Trap”: When Tokenization Is Mistaken for Banking
A stablecoin can look deceptively simple:
- deploy a smart contract
- peg the price to 1 USD (or 1 EUR)
- add liquidity on exchanges
- market it as “faster payments”
But the promise behind a stablecoin is not the token—it’s the credible ability to redeem, at scale, under stress, while staying compliant across jurisdictions.
That’s the trap: teams treat stablecoin issuance like a blockchain feature, when in reality it behaves like a regulated, risk-managed, liquidity-sensitive money product.
If your organization cannot operate that money product day after day—during hacks, bank outages, market panics, and regulatory changes—then you don’t have a stablecoin. You have a liability with a smart contract wrapper.
What “Infrastructure” Actually Means for Stablecoin Issuers
A stablecoin issuer needs far more than engineering. You need operational capacity similar to a financial institution—whether or not you’re legally classified as one.
1) Redemption Is the Product, Not the Token
The stablecoin’s value comes from the market believing:
- redemptions will be honored
- redemptions will be timely
- redemptions will be fair and rules-based
- redemptions will still work under stress
If redemptions are limited, delayed, selectively offered, or operationally fragile, the peg becomes a marketing claim rather than a guarantee.
This is why credible stablecoins obsess over rails: banking partners, settlement windows, treasury workflows, and exception handling. “24/7 onchain” means little if redemption is “business hours only.”
2) Reserve Management Is a Full-Time Discipline
A stablecoin is only as stable as its reserves—and the governance around them.
Reserve management includes:
- asset selection (cash, short-dated government securities, repo exposure, etc.)
- concentration risk (single bank, single custodian, single instrument)
- liquidity under stress (can you meet large redemptions fast?)
- duration and interest-rate risk
- operational controls (who can move reserves, how approvals work)
Global standard-setters have repeatedly highlighted that stablecoins introduce traditional finance risks—liquidity, maturity mismatch, run dynamics—into new rails. For background, see the Financial Stability Board’s work on global stablecoins and the BIS research on stablecoins and payment systems.
3) Compliance Is Not a Checkbox—It’s an Operating System
Stablecoin issuance touches:
- sanctions screening
- KYC / AML obligations
- suspicious activity monitoring
- jurisdictional restrictions
- counterparty risk controls
- policy updates and audits
In 2025, a key industry trend was that compliance expectations increasingly extended beyond centralized exchanges into payment flows, stablecoin rails, and institutional onramps. Even if a token can move permissionlessly, the issuer’s interfaces with banks, institutions, and redemption channels are not.
High-level guidance from global bodies like the FATF on virtual assets and VASPs remains essential context for anyone building stablecoin distribution and redemption.
4) Market Structure: Liquidity Is Earned, Not Declared
Issuers often assume liquidity will appear automatically once the token exists. In practice, liquidity requires:
- reliable market makers
- clear legal terms
- consistent issuance/redemption arbitrage
- deep exchange and OTC support
- transparent risk disclosures
Without this, the stablecoin can trade off-peg during volatility, and “stable” becomes conditional. The operational reality is that liquidity is a relationship business, not only a smart contract problem.
5) Security and Incident Response Must Match Systemic Risk
If your stablecoin grows large enough, it becomes a target:
- smart contract exploits
- bridge failures (if multichain)
- phishing and social engineering
- supply chain compromise of signing keys
- insider threats and operational mistakes
Stablecoin issuers need security practices closer to critical infrastructure: segregation of duties, hardware-backed key management, rigorous monitoring, and rehearsed incident playbooks.
For users, this is also why self-custody matters: the safer your signing environment, the less you rely on any single platform’s security posture. A stablecoin may be “stable,” but your access to it is only as secure as your keys.
Why So Many Companies Want a Stablecoin Anyway (And When It Can Make Sense)
The demand is understandable. A well-run stablecoin can:
- reduce cross-border settlement friction
- enable 24/7 programmable payments
- improve treasury efficiency for onchain-native businesses
- create new distribution channels (wallets, apps, payment APIs)
- support tokenized assets and onchain capital markets
In 2025, the narrative broadened: stablecoins were no longer just for trading pairs—they became a settlement layer for tokenized real-world assets, onchain treasury management, and B2B payments. This direction aligns with broader institutional research into tokenization and the future of market infrastructure (see the BIS Project and tokenization research hub).
A stablecoin can make sense if the issuer has (or can credibly build) the operational stack described above—and if there is a real business need that cannot be met by integrating existing stablecoins.
The Hidden Cost: Stablecoin Issuance Is a Promise With Unlimited Duration
When you issue a stablecoin, you’re effectively promising:
- ongoing solvency (reserves must remain sound)
- ongoing liquidity (redemptions under stress)
- ongoing compliance (laws evolve)
- ongoing transparency (markets demand it)
That’s why “we’ll launch a stablecoin” is not comparable to “we’ll launch a token.”
It is closer to: we will operate a high-trust financial utility indefinitely.
What Users Should Watch: A Practical Stablecoin Due Diligence Checklist
If you’re a trader, builder, or long-term holder using stablecoins for payments or savings-like behavior, focus on the fundamentals:
- Redemption clarity: Who can redeem? How fast? Under what conditions?
- Reserve transparency: Are attestations frequent? Are reserves described clearly?
- Regulatory posture: Is the issuer operating in a credible compliance framework?
- Operational resilience: Have they handled market stress events smoothly?
- Chain exposure: If multichain, what’s the bridge or native issuance model?
- Concentration risk: Heavy dependence on a single bank, custodian, or geography can matter.
For a general overview of stablecoin types and risks, the IMF’s digital money and crypto resources are a useful neutral starting point.
Where Self-Custody Fits: Stablecoins Are Only Useful If You Control Access
Even the best-run stablecoin doesn’t remove personal security risk:
- exchange freezes
- account takeovers
- phishing
- SIM swaps
- malware stealing keys
For many users, stablecoins are working capital—used for payroll, payments, trading collateral, and cross-border transfers. That makes the storage decision operational, not ideological.
A hardware wallet like OneKey can be a practical layer here: it isolates private keys from internet-connected devices and supports everyday stablecoin usage across major chains—helping reduce the chance that a single compromised computer or browser extension becomes a total loss event.
If your stablecoin balance is meaningful, protecting the signing environment is part of the same discipline the “stablecoin trap” warns about: in finance, reliability is the product.
Conclusion: Stablecoins Reward Serious Operators—and Punish Shortcuts
Circle’s warning is ultimately a reminder about incentives and responsibilities:
- Stablecoins are not “just tokens.”
- Trust is not created at launch—it’s maintained daily.
- Liquidity, compliance, and security are the moat.
In 2025 and beyond, stablecoins will likely keep expanding into mainstream payment and settlement use cases. But the winners won’t be the teams that ship the fastest contract—they’ll be the ones that can operate stablecoin infrastructure like critical financial plumbing.
And for users, the best approach is equally unglamorous: choose stablecoins with credible operational foundations, stay alert to changing risks, and secure access with robust self-custody practices when appropriate.
